Interactive Intelligence Inc Q3 2009 Earnings Call Transcript

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 |  About: Interactive Intelligence, Inc. (ININ)
by: SA Transcripts

Interactive Intelligence Inc. (NASDAQ:ININ)

Q3 2009 Earnings Call

October 26, 2009; 4:30 pm ET

Executives

Don Brown - Chairman, President & Chief Executive Officer

Steve Head - Chief Financial Officer

Paul Weber - Vice President of Sales for North America

Analysts

Shyam Patil - Raymond James and Associates

Tavis McCourt - Morgan Keegan

Graham Ryan - Bears Capital

Mike Latimore - Northland Securities

Craig Nankervis - First Analysis Corp.

Operator

Welcome to the Interactive Intelligence third quarter 2009 earnings conference call. At this time all lines are in a listen-only mode. Later, we’ll announce the opportunity for questions and instructions will be given at that time. (Operator Instructions)

At this time, I’d like to turn the conference over to Dr. Don Brown, President and CEO of Interactive Intelligence. Please go ahead.

Don Brown

Thanks for joining us. Presenting with me on the call today is Steve Head our CFO and we’re also joined by Paul Weber our Vice President of Sales for North America. After our discussion and concluding remarks, we’ll have a Q-and-A session, and for any of you not able to ask questions today, please follow up with Steve after the call. I hope you’ve all received our third quarter earnings release by now, if not, it’s up on our website. Before we get any further into the call, Steve will present the standard legal disclaimer.

Steve Head

Thanks Don. Over the course of this conference call we will make predictive statements about our results, performance, plans, and objectives. In an effort to assist you in understanding our company, the enterprise software industry combined with the rapidly evolving economic environment makes predictions challenging and problematic. These predictive statements are forward-looking statements under Federal Securities Laws.

Our actual results could differ materially as a result of a variety of potential risks and uncertainties. Our 2008 Form 10-K, which we filed with the SEC, describe factors, risks and uncertainties that could cause our actual results to differ materially. The company disclaims any obligation or undertaking to update or revise any forward-looking statement.

Also, during this call we may refer to non-GAAP financial measures. These non-GAAP results eliminate the impact of stock base compensation expense and non-cash income tax expense. Management uses these non-GAAP financial measures in analyzing the business.

Don Brown

Alright thanks Steve. I’ll start off with an overview of the results for the quarter and then Steve will go into detail on the numbers and after that I’ll come back and give you a little update on company news and what we see ahead.

For the third quarter of 2009, we recognized revenues of $33.2 million up 10% from the third quarter of last year. We recognized product revenues have $15.6 million compared to $14.7 million last year of particularly noted that we sign three new CaaS contracts, so that’s our acronym for communications as a service our hosted contract center services worth a total of at least $39.6 million over their terms.

These contracts are for periods of three or four years and we’ll recognize revenue as the services are delivered. This is far and away the best quarter we have ever had for our hosted contracts center servicing offering and something we hope to build on in the future. We received licenses order from 64 new customers during the quarter, we had two of those in addition the two CaaS orders that exceeded $1 to us and an additional 8 over a quarter million dollars.

We achieved record services revenues during the quarter of $17.6 million and increase of 15% from the third quarter of last year. On a non-GAAP basis, net earnings for the quarter were $5.7 million or $0.31 per diluted share compared to $2.0 million or is $0.11 per diluted share for the third quarter of 2008.

I’ll now turn it over to Steve for some detail.

Steve Head

Okay. As usual I’ll comment on the operating performance, then the balance sheet and cash flows. There are two major items that impact the information we will discuss. First on a GAAP basis, we recorded income tax expense of $2 million in the third quarter of 2009. As we discussed in prior calls, most of the expense did not require cash payments.

On a non-GAAP basis, our tax expense was $92,000 for the third quarter of 2009. I will have additional comments on taxes in a few minutes. Second we recorded stock-based compensation expense of $975,000 for the third quarter of 2009, which compares to $439,000 in the third quarter of 2008. The increase in expense this year was due to a decrease in our expected forfeiture rate as a result of lower and fully turnover with the option holders.

This is a one-time increased of about $200,000 and we expect our stock-based compensation expense to be about $800,000 in the fourth quarter of this year. Last year our option expense was unusually low because we reversed expense tied to financial performance and we had recorded earlier in that year. Based on the conclusion we were not going to meet the financial targets.

In this quarter, our partners continue to generate the majority of orders with 74% of the dollar amount coming from the channel. We received license orders from 64 new customers for our contact center enterprise messaging and IP PBX solutions. The overall average new customer order in the quarter was $124,000 with an average new customer order for the contact center and large enterprise IP PBX licenses of $145,000.

As Don already noted we did sign from significant new CaaS contracts with a total expected value over the next four years of $3.6 million. For the third quarter, North America provided it 69% of the orders while AMIA was 21% again those are fairly typical. The timing of revenue recognition for orders is dependent on a number of considerations and only a portion of orders are recognized each quarter, with some of the unrecognized amounts reflected on the balance sheet.

During the third quarter of this year, we saw a higher than usual percent of orders that were perpetual and potentially recognized in the quarter. For the quarter 92% of the orders were perpetual compared to more normal 84% that we experienced in the third quarter of 2007. As a result, we were able to recognize a greater percent of the orders that we received in the current quarter.

For the third quarter of 2009, services revenue increased compared to 2008 as the number of users and related support fees increased. Support revenues were 77% of services revenue third quarter. Services revenue is also include professional services CaaS and education services. Our product margin was 74.6% in the third quarter of 2009 of the product margin vary some quarter-to-quarter based on the number of media server and gateway appliance licenses and cost related to third party software and handsets.

Our non-GAAP services margin up the third quarter of 2009 was 68.9% which is up from 60.7% in the same quarter last year. We have continued to manage expenses in the quarter lower expenses in 2009 compare to 2008 while increasing revenue. Our non-GAAP gross profit was $23.7 million in the third quarter 2009 in the margin was 71.6% of total revenues. The gross margin increased by $3.4 million while the gross profit increase by $3.4 million while the gross margin percentage improved by 4%.

Total operating expenses on a non-GAAP basis for the third quarter of 2009 were $18.5 million. It small increase from $18.3 million on the third quarter 2008, these operating expenses were 55.7% of revenues in 2009 compared to 60.9% of last year. Our Globe staffing at September 30, 2009 totals 622 people. Non-GAAP operating income which excludes stock-based compensation expenses was $5.3 million or 15.8% revenue on the third quarter of 2009 compare to $2 million or 6.7% of revenues last year.

Interest income was $50,000 in the third quarter of 2009 given of the balance of cash and investments increased interest income decreased of the result of lower yield on investments. Interest income while remain at these levels until yields improved. Other income was $480,000 in the third quarter of 2009 compare to other expense of $277,000 on the third quarter last year.

This difference reflection at the dramatic change and exchange rate trends between the years. For GAAP purposes are effective income tax rate was 42% for the quarter. Of the GAAP tax rate for 2009 is currently expected to be about 42%, but well depended on the level of earnings achieved. As of September 30, 2009 we still have various tax credits carry forward on a consolidated basis to offset $5 million of taxes and net operating losses.

The net operating loss related to the AcroSoft subsidiary of $1.1 million. These amounts are included and recorded to per tax assets. We also have unused compensation deductions related to stock-option exercises of over $17.6 million available to reduced taxable income. Our GAAP taxes in this quarter were eliminated by utilizing the compensation deductions with the resulting credit to additional paid in capital.

During the third and fourth quarters of 2008, we repurchased a total of 1.2 million shares, because of the repurchases of the basic shares outstanding have decreased from the prior year, because of recent share price increases, we do expect the diluted share count to increase in the fourth quarter. If the market price per share averages $21 diluted share count should be approximately 18.8 million shares for the fourth quarter.

Turning to the balance sheet, at September 30 we had $60.0 million of cash and short term investments. This compares to $54 million at June 30 and we continue to be debt-free. Accounts receivable day sales outstanding at September 30, 2009 were 67 days, consistent with last quarter and lower than most recent quarter ends. Total deferred revenues at September 30, 2009 were $41.5 million which compares to $41.8 million at June 30 and $39.9 million a year ago.

Deferred service revenues had a sequential increase of $1.2 million and an increase of $3.4 million compared to a year ago. Deferred product revenues decreased $1.5 million compared to June 30, these deferred revenues are primarily related to turn based licenses with long term customers and the balance varies depending on the orders received from those customers in any quarter. As discussed earlier, we had a lower dollar amount of turn based license orders in the quarter.

Also we had two orders that were deferred in prior quarters due to specific reasons that were recognized in this quarter. We have included a statement of cash flows in the earnings release. Cash flow from operations for the first nine months was $13 million including $3.7 million in the third quarter and in the third quarter of 2009; we purchased property and equipment totaling $442,000 and received cash of $1.1 million as a result of stock-option exercises.

Don, that wraps up my comments on financials.

Don Brown

Thanks, Steve. We recently held our annual global partner conference here in Indianapolis with record attendance. 232 partners attended along with 51 consultants and analysts. The results were good with 96% rating the overall conference a four or five on a five point scale and all indicating that they’ll be back next year. The hottest topic at the conference was our soon to be released product interaction process automation or IPA.

We did an extensive live demo with a late data version that works flawlessly. We’re targeting general availability for the end of the year and have IPA up and running and both end user around partner environments. One of our trial customers gave a presentation on their experience at the recent Gardner IT expo in Orlando.

At the partner conference, we had several breakout sessions, all of which were pack. We’ve generated over 200 IPA related activities such as feature articles, online coverage, Webinars and Podcast. Our informational services team ramped up and able to provide the process consulting services our customers require. We held internal technical training a couple of weeks ago to get our system engineers ready and we’re looking forward to quickly getting some case studies produced shortly after the product goes GA.

We’re also continuing to make good progress based on our AcroSoft acquisition back in May. We’ve leveraged AcroSoft’s position in the insurance industry to sign several deals in that vertical. At the partner conference, we announced plans for a next-generation document management system integrated with CIC and IPA that we hope to start selling sometime in 2011.

Other noteworthy items during the quarter included we signed a partnership agreement with spam link a very large communications reseller, with a broad geographic reach and significant experience successfully selling contact center solutions. Gardner recognized us in the visionary quadrant for Unified communications. In a highly respected analyst firm awarded us with their 2009 product innovation award. Software magazine named us as one of the top 200 software companies in the world and lastly you may have seen that we added a new board member, Rick Halprin.

Rick is the former CFO of JBA International and brings a rich background, particularly in the sales and distribution space. So, overall we feel that we made good progress in the quarter. We’re excited to see our CaaS effort really take off and we’re gratified by the reaction our partners to IPA. While the economic waters are still choppy, we’re seeing signs of improvement. We’ll continue to manage expenses while cautiously taking steps to reestablish faster growth.

We estimate that annual revenues for 2009 will be in the range of $128 million to $130 million. We expect to record more hardware sales in the fourth quarter and thus have higher product costs. We’ll also see higher R&D costs due to staff we’ve added as well as increases in sales and marketing expenses. Overall we estimate our non-GAAP EPS for the year will be in the range of $0.87 to $0.90.

With that I’ll turn the call back over to the operator to open up for questions.

Question-and-Answer Session

Operator

(Operator Instructions)Your first question comes from Shyam Patil - Raymond James and Associates.

Shyam Patil - Raymond James and Associates

Steve, just first question is, if you recognized a typical percent of term license or perpetual what would revenue have been in apple comparison?

Steve Head

There’s a lot of variables that go into the product and revenue being recognized in the quarter, Shyam, as we have talked about a few of them on the call, with orders from the prior period that we were age to recognize this period, but we always have some different things like back going on based on collections, but just in the ballpark, there’s probably $750,000 to $1 million. Again there is a lot of variables and there is no précising answer that you can say it’s exactly a certain number.

Shyam Patil - Raymond James and Associates

We’ve seen a couple of sort of solid quarters with some large deals, starting the close again. Can you talk a little bit about the RFP environment for large deals right now and kind of how that’s changed over the last quarter or so?

Don Brown

Well, I’ll turn that over to Paul and let him give you a feel for what he’s seeing on the field at least here in Americas.

Paul Weber

Over the last couple of quarters, we continue to see pretty decent size RFP and RFI history. A lot if it has to do with people really just IP enabling their contact centers or doing some type of consolidation to take advantage of voice over IP or SIP in particular. I don’t know about the last quarter; but over the last six months.

We have seen more of the aspect and some so if Genesis and Nortel systems that have been out there for a long time. We’re stating to see people really put and plan in place to start researching their next platform decision, so we’re seeing a pretty good increase of decent RFPs out there.

Shyam Patil - Raymond James and Associates

Then my last question is around the CaaS deals that you signed this quarter. Can you talk a little bit about, where those came from, what size customers those were just roughly speaking and then who the competitors were in those deals?

Don Brown

I can at least talk about one is a large global company, global 1000 this is a healthcare division and they were adamant on finding a hosted contact center solution. They really want to have to go through their IT organization. They did a trial with CosmoCon that failed pretty miserably and turned to us.

We did a trial with them at worked extremely well and we went ahead and obviously negotiated a good contract with them. We’re now working with them on additional opportunities around the world. So, that was a great one to break into Paul, you have better knowledge of the second large one. Do you want to share what you can about that one?

Paul Weber

Yes, that was a telecom company itself and they are really looking to, again, get out of the premise based business altogether. What we’re seeing out there, is you have the low end companies like CosmoCon or in contact, and on the high end you have companies like IBM that are trying to offer a hosted solution and what they found is that IBM side as they think on the method offering, they’re basically just have a data center in there putting a whole bunch of different products that they have to buy together to try to offer a system that’s complex enough to handle the needs of the bigger companies with us.

We’re kind of seeing that obviously we’ve that the depth of knowledge in the context on our space, but we can now offer a hosted. So we are definitely starting to see more companies, and definitely the larger companies that are looking at this option for something that I don’t think they would have considered a few years back.

Operator

Your next question comes from Tavis McCourt - Morgan Keegan.

Tavis McCourt - Morgan Keegan

Steve, I wonder if you could kind of remind us on the term licenses. I think if I remember right, those were typically older customers, and it was just that they weren’t ordering this quarter, or were they moving from term to perpetual license?

Steve Head

It’s just we get in restate orders from them. That’s always over the last several quarters, couple of years, it’s been fairly steady for spent that’s about 15% in a typical quarter that are term based license orders from those customer base. It just happened as things go that this quarter. They were relatively fewer of those orders. We didn’t convert any licenses or is there anything else. It’s just that those particular customers weren’t ordering this quarter.

Tavis McCourt - Morgan Keegan

Is that contract renewals, but typical happen, or that expansion of their capabilities?

Steve Head

To expansion, it’s additional licenses that for software, the support agreements, whenever we’ve received the invoices those, they’re treated just like, whether it’s perpetual or time-base, those are all treated similarly.

Tavis McCourt - Morgan Keegan

So the deferred revenues come down, and usually there is some growth term base licenses is that bring those back up, so we normally see a flat for revenue trend…?

Steve Head

Yes, exactly. Typically, you have some coming in and some coming out each quarter in this state. Then if you look at our trend overtime, it does vary quarter-to-quarter. It’s just that this quarter was more pronounced than we’ve seen in other quarters.

Tavis McCourt - Morgan Keegan

Then on the service revenue, look like the support services really had a nice quarter, which I would have thought that would be kind of a smoother ramp. Was there anything onetime in that number? Unless my numbers were incorrect from last quarter, it looks like they ramped up about a $1 million or so sequentially, which I think is a pretty unusual gain for support revenues.

Then my other question on service margins are: it looks like the cash revenues will be increasing as a percentage of the mix. Does that do anything from the gross margin profile services, positively or negatively?

Steve Head

As far as the revenue is concerned, we typically are very conservative on what we recognize, and we’ve had some very, cash collections have been good as we talk about the DSO. As a result, we’ve been able to recognize maybe a little bit more than we would in other periods, but it’s just really the growth of that install base just continue to increase.

As far as the margins, we have seen nice margin expansion this year have done a nice job managing the expenses had seen nice margin improvement both that the supports group and with our PSO group, which has contributed. As CaaS ramps, it may have some impact some impact, but it’s still a relatively small part of the total. It’s not going to appreciably change that in the next several quarters.

Tavis McCourt - Morgan Keegan

In terms of the process automation business, are you guys focused, Don, on specific verticals or some specific applications initially? Or is this really kind of a horizontal launch across a number of verticals?

Don Brown

It is a horizontal launch, although we certainly are attuned to a certain verticals, insurance being the primary one, but we’re receiving strong interest across the board.

Operator

Your next question comes from Graham Ryan - Bears Capital.

Graham Ryan - Bears Capital

You guys are on a couple of nice new partners in the quarter. Don, could you talk about kind of the new partner outlook? What does that pipeline sort of look like? Are people coming to you want a new side of your solution? Just any sort of details you can provide on that front?

Paul Weber

Graham in the last six months to a year, we have seen larger partners coming our way, just as a result of the architecture we have now are so scalable and the size of these opportunities. There is always competition in every deal, so you’re beating someone, and that’s one way that’s probably the best way to recruit a good partner is to beat them several times in competitive deals.

So we have seen, for instance, IBM U.S. is now able to resell our products. Spanlink as probably one of the largest Cisco resellers in the country and have come to us to take us on as well. So we are more definitely gradually stepping up the size and scope of the partners that we’ve seen.

Graham Ryan - Bears Capital

The partners you do sign, what sort of agreement do they sign with you? I’m sure it’s not exclusive, but I mean, are they just warning to give their customers more options in terms of what to buy in terms of for a contact center?

Paul Weber

They’re not exclusive. What they’re seeing, I think that just that is, now that the all of one platform we have is really scalable, that they can move up market with it and really have a product that not everybody else is going to be bringing in, like Cisco and everybody resells Cisco. Everybody resells a lot of people will resell and buy our Nortel. We’ve really be have the unique product offering. So it’s something else that their salespeople, they feel they can hedge their bets by having a product like ours if they feel might be more of a visionary product.

Graham Ryan - Bears Capital

Was there any geography strengths on the quarter? I mean any particular areas where you saw good activity?

Don Brown

Nothing substantial that has changed from previous quarters the same sort of distribution that we’ve typically seen around the world.

Graham Ryan - Bears Capital

Then the last thing, Steve, at what point is you going to breakout the CaaS revenue stream? I mean is it needed to be 5% of revenue? Is there some other materiality level that it needs to get to? When can we expect to see some of those types of numbers?

Steve Head

We haven’t really concluded on what the benchmark will be, but right now it’s such a small piece. The deals that we talked about this quarter, the deals we signed earlier this year. The two deals we just signed in the last quarter don’t even generate revenue until December, or January, or February.

So takes a while between signing before. We’re generating revenue. So it’s going to be a while before ramps up to be meaningful enough to breakout when we’re talking about total revenues of $30 plus million and it has the meaningful enough to make it a separate line item.

Graham Ryan - Bears Capital

Then the last thing, Don, in terms of new partners for IPA, are you just going to be selling for your existing retailer channel, or are there certain types of partners you like to bring on just to sell the process automation piece of it?

Don Brown

We definitely think we’ll be able to attract other types of partners. We’re starting off focusing on some of our key partners who have more of the business analytic capabilities, the consulting and just stronger IT skills. So we’ll initially focus on those guys maybe kind of dozen of our partners around the globe, but we fully expect that as we get IPA out to get some good customer success stories that we will be able to attract additional partners and partners not even in the communications industry.

Operator

Your next question comes from Mike Latimore - Northland Securities.

Mike Latimore - Northland Securities

Just on the services gross margin, Steve, I think historically you’ve got a sort of 65% to 67% gross margin there. Is that still kind of a good number to use, or is this sort of a new run rate you’ve established?

Don Brown

I always like to think that we can maintain this, but we’re stressing part of the organization now with the number of staff we have and we’re going to be adding some people in some areas, so I wouldn’t necessarily expect that we’d be able to obtain the same percentage again next quarter. We would expect it to continue to be strong, though, but it might be a little less than where it was this quarter.

Mike Latimore - Northland Securities

Then, if you look at order growth say either sequentially or year-over-year, how did the install base versus the kind of new customers, what were the results there in terms of just order growth?

Steve Head

In both cases, when we look at the third quarter of ‘09 versus ‘08, we were down, which goes back to what we’re seeing. That’s excluding CaaS orders were just on up the license orders that we’ve currently and that goes back to what we’ve been saying about the economy continues to be choppy out there that, people are still being fairly somewhat reluctant in the buying process. That said, the pipeline continue to be very strong, and there are a lot of opportunities. When we include the CaaS orders then we’re looking at an increase in new customers and an increase in overall order for the quarter.

Mike Latimore - Northland Securities

Just with regard to the regional comment, was it Europe it sometimes your soft obviously in the third quarter, was that sort of soft sequentially right normal the European region?

Don Brown

As the percent of our total order it was pretty consistent so, again I’m just looking at this on a license orders for the quarter its pretty consistent with what we’ve seen in other quarters; and no different behavior there.

Mike Latimore - Northland Securities

Then you mentioned maybe a little more hardware mix in the fourth quarter versus the third as you look at your pipe line, is the hardware mix as a percent sort of normal, no major change from past looks at the pipeline?

Don Brown

We don’t expect that fourth quarter will be any more than it was maybe than the second or first quarter, but it probably more than we had recorded in the third quarter of this year. We don’t expect to be necessarily higher than the first or second quarter of this year, but probably higher than the third quarter as a percent, just because it relatively light in the third quarter.

Mike Latimore - Northland Securities

In terms of your non-GAAP EPS guidance, are you assuming any additional FX benefit that, or no?

Steve Head

No we’re assuming not. We benefited from that in the last couple of quarters nicely, but we can’t it’s hard to speculate where rates are going to go and to the extent that they fluctuate positively or negatively it could affect that EPS number.

Mike Latimore - Northland Securities

Just on the IPA product, Don you mentioned in a kind of horizontal launch with in a potentially focus on insurance. How about in terms of customer size? Do the prospective customers that are showing interest, they are going to larger now, or they kind of across more small and mid large?

Don Brown

They are somewhat larger I think we’re getting interest from companies of all sizes, but the big organizations really do light up about IPA. I was in Spain last week and but with I mean turned out it was an insurance company there and they’re, I think one of the top three insurance companies in Spain and it just makes so much sense to these guys. They see so many opportunities for the cost savings, for increases in productivity, that it is those larger organizations with lots of processes, lots of people involved in processes that can most benefit from a product like IPA.

Operator

Your final question comes from Craig Nankervis - First Analysis Corp.

Craig Nankervis - First Analysis Corp.

Steve, I guess did I hear that head count was down sequentially or did it mishear that?

Steve Head

It was down slightly. We dropped from 630 to 622 but as we talked about before during the summer we ramped up. We developed a really nice internship program at several universities and so the 630 included a number of in turns and they went pack to school obviously and now we have work full time people relative or compared to where we were, last quarter so down slightly on head count, but it’s actually work full time people.

Craig Nankervis - First Analysis Corp.

Is there anyway you can talk generally about your investment outlook maybe even versus what it was a quarter ago, if it has been modified anyway or just any broad comments as we think about next year the level of investment. It seems to me to be by and large incremental and not significant and is that a pattern we should continue to expect?

Don Brown

We are reevaluating quarter-by-quarter, obviously we’ve taken great pains through this entire downturn to manage our expenses and to be cautious so that we get maintain the nice track record we’ve got going of consistent profitability and more than anything, we want to continue that, but we really do believe that we’re on to something here with our CIC line of products with IPA.

We’re excited about the new document management stuff and so we don’t want to, constrain spending so much that we’ve failed to maximize those opportunities, so we have invested we’ve hired additional people as we’ve mentioned in R&D and to some extent other areas, so I guess just at a global level, you won’t see us next year really trying to tightens screws and ramp up our operating margin.

The sort of operating margin that we can operate in a roughly a 10% range that allows us to invest in additional marketing distribution, the product resources or development resources we need to realize the potential of these products. We would really like to reestablish much faster growth, we liked it a couple of years ago when we were growing 32% year-over-year and I’m not promising exactly that, but we would certainly like to step up our growth, as we see signs that global economy is recovering and we’re in a position to do so.

Craig Nankervis - First Analysis Corp.

I guess, changing the subject a little do I understand that the content management piece that you were discussing, is that actually a third new product area that you’ll be offering, or how do we think about what you’re doing there?

Don Brown

Yes, it is although it integrates very nicely with the other two and the sort of picture that’s emerging is that we’re able to go in and just like we did this last week in Europe and talk to customers about kind of a three pronged strategy, three different ways we can help them. One is with customer interaction management the whole CIC line of products.

The second is with process automation and of course that integrates well with the customer interaction management, but it extends more broadly into the enterprise and we see the document content management as a third piece that really completes that whole story and all three of these component working very nicely together.

AcroSoft had done a good job with their document management solution on fairly limited resources and targeted specifically at insurance and so what we’re doing is rewriting it, leveraging, lot of the software components we build last 15 years. We don’t really have to start from scratch and we do think that it represents a new opportunity area for us, as we’ve gone out and talked to a lot of large organizations.

Many of them either have not adopted content management or have sort of last generation mainframe style content management solutions that certainly weren’t architected for a cloud based area that we see coming and so we are excited about adding this and having that three pronged approach that kind of help a lot of these larger customers.

Craig Nankervis - First Analysis Corp.

Don, what you actually sell document management as a standalone product? Is that theoretically possible as you see yourself going to market or would it always be in conjunction with one of the other two offering in some way?

Don Brown

It’s possible I see it kind of the same way I do IPA where with IPA our initial focus is on selling it in conjunction with CIC and entering the benefits of process automation, extending from the customer interaction management, but eventually being able to sell IPA if it appears clear that would make sense to do and I think will be in the same position with the document management.

That initially we will very much sell it as an integrated part of the customer interaction management and the process automation, but I think that if we do what we’re capable of and if we’re able to kind of able to leapfrog the currently generation of products in the way that I think we can, that we do have that possibility in other year so down the road.

Operator

(Operator Instructions) Gentlemen, we have no further questions at this time.

Don Brown

Okay. Alright well thanks everybody and we’ll do it again next quarter.

Operator

That does conclude today’s presentation. Thank you for your attendance and have a nice day.

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